A debate is brewing in India about a possible increase in taxes for the country’s super-rich.

Earlier this month, C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, suggested that the government could consider such a tax increase in the upcoming financial budget, which will be placed before Parliament next month.

According to the Hindu newspaper, Mr. Rangarajan said they could try to raise more taxes possibly by adding a new tax on income above a certain level. He didn’t elaborate but said this needed further discussion.

If the government does decide to raise taxes for the wealthy, it would be following in the footsteps of the U.S. and France, where the governments have recently raised taxes for the rich after many months of heated debate.

Late last year, the U.S. increased the tax rate for individuals who have a taxable income of at least $400,000, or couples with at least $450,000, from 35% to 39.6%.

Meanwhile, France increased the income-tax rate of people in the highest tax bracket from 41% to 45%. It also proposed a special tax on incomes above 1 million euros ($1.3 million) a year, which would result in 1500 individuals paying an overall tax rate of 75%.

In December, a French court rejected the 75% tax rate, but the French government has said it is working on tweaking the rule to accommodate the court ruling.

In India, the government hasn’t yet formally proposed a higher tax, and a finance ministry official declined to comment on this on Friday.

Even so, Indian industry and several commentators have come out vehemently against the possibility of higher taxes.

They note that India’s tax base is very small, with just 30 to 40 million people out of a 1.2 billion population paying any tax at all. A higher tax would just further squeeze the small universe of Indian taxpayers.

It is widely believed that hundreds of thousands of self-employed individuals in India, such as those who run private businesses or who have accumulated wealth by buying and selling real estate, typically pay little or no tax. In India, income on which taxes are owed but not paid is often referred to as “black money.”

Tax lawyer Sunil Jain, of J. Sagar Associates, says that it’s imperative that tax authorities take steps to widen the tax base, with a focus on real estate transactions, which often happen in cash in order to evade taxes. “You should spruce up your tax recovery machinery,” said Mr. Jain.

Some economists say India might do better to lower income tax rates in order to widen its tax base, and ultimately increase tax revenues.

Trade group Federation of Indian Chambers of Commerce and Industry suggested that higher taxes would have the opposite effect, leading people to duck their duty to pay taxes. “The government should not fuel the black economy by increasing tax rates,” Ficci said in a recent statement.

At the moment, individuals who have income of more than one million rupees ($18,500) a year fall in the highest tax bracket, and attract a basic tax rate of 30%. Mr. Rangarajan’s proposal would likely be applicable to people who fall in this tax bracket. India’s average per capita income was around $1,000 in the financial year between April 1 2010 and March 31, 2011.

Still, some tax experts say that higher taxes on those who earn $18,500 or more would be unfair, given that the cost of living has been rising sharply in India in recent years.

Other critics note that while raising taxes could help bring in more revenues for the Indian government, there is a big question about whether the government will spend it efficiently.

“The government ought to be controlling its own expenditure drastically first, especially the travel of ministers/high officials abroad and the lavish treatment given to them by embassies,” wrote a commentator in the Daily Pioneer newspaper.

In addition, the commentator said that the government should crack down on corruption within government departments, the paper said.

Mr. Jain, the tax lawyer, suggests that the government could consider targeting only the ultra-wealthy, or those who have incomes of more than $450,000 a year.“That’s going to be a very sellable idea,” said Mr. Jain.

Readers, do you think tax rates for the rich should go up in India? And at what income level should a taxpayer be included in this category? Share your thoughts in the Comments section.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.